MicroStrategy’s Bitcoin Gambit: Accounting Magic or Legit Earnings?

Michael Saylor’s software firm turned crypto whale keeps reporting ‘profits’—but dig deeper and the numbers smell like Wall Street alchemy.

Subheader: When HODLing counts as income

MicroStrategy’s latest earnings report shows a paper profit from its massive Bitcoin stash. Too bad actual cash flows still depend on selling enterprise software to actual customers. The market’s buying the narrative—for now.

Subheader: The fine print behind the crypto carnival

Accounting rules let MSTR book unrealized BTC gains as earnings. Meanwhile, their core business shrinks faster than a shitcoin in a bear market. But hey—at least they’re not Celsius.

Closer: In a world where ‘number go up’ substitutes for revenue, maybe we should all quit our jobs and become full-time bagholders. The SEC’s gonna love this one.

MSTR created a movement

Strategy (big "S") has not only created a movement, but a category. Levered MSTR ETFs (including this new one which pays "income") serve the market for whom MSTR’s 70 vol is dull. Grayscale announced an ETF that tracks 30 companies that hold at least 100 bitcoin.

Last, but not least, Cantor Equity Partners, a SPAC, is merging to form Twenty One Capital, which will hold $3 billion of bitcoin. Mention this trend in a room full of pundits and they’ll yell "Gamestop!" in unison. It’s fun.

This is all fine. Adding bitcoin to the treasury of non-crypto companies* is an interesting trend. (And that doesn’t include crypto-native companies, like CoinDesk’s parent company, Bullish.)

But it’s only bitcoin at the moment.

US (bitcoin) exceptionalism

Despite the loosening of U.S. regulatory zip-ties on digital assets and the recent flurry of ETF filings, bitcoin still dominates the conversation (it still accounts for about two-thirds of the total cryptocurrency market).

Again, that’s fine if we are talking about a store-of-value asset contributing to a corporate treasury otherwise allocated to cash and treasuries. However, the growing number of flavors of bitcoin exposure--leverage, yield, optionality, protection--are taking the place of education about what other blockchain assets hope to deliver, and why it is important to spend more time thinking about the asset class.

Until recently, that was fruitless for many investors and advisors, since brokerage- or futures- account implementation was not available. (Of course, it has been for ETH, but you need more than ETH to think about the "digital asset class." Lack of enthusiasm for ETH investment vehicles, we believe, has struggled in part for this reason.)

If 2024 was bitcoin’s "coming out" year, we hope that 2025 gives investors and traders opportunities to think deeper and more broadly, and to implement accordingly. If not, the U.S. crypto investing narrative will start to sound like a "bitcoin maxi," and that feels like leaving money on the table.